Will Ray Kroc's Scorching Biopic Hurt McDonald's Stock?
Image source: Weinstein Company.
A movie thatMcDonald's (NYSE: MCD)probably prefers you didn't watch opened over the weekend. Weinstein Company's The Founder -- a highly unflattering look at Ray Kroc and the burger chain he eventually wrestles away from its two founding brothers -- hit a multiplex near you on Friday.
McDonald's may get its wish. The film opened quietly, playing in roughly a third of the screens as the weekend's other debuts,Split and xXx: The Return of Xander Cage. Audiences also failed to show up. Split and xXx were the weekend's two highest-grossing films over the weekend, ringing up $40.2 million and $20 million, respectively, in domestic ticket sales. The Founder's box office receipts clocked in at a more modest $3.8 million, seventh among all movies playing.
Given the film's lukewarm per-screen average it is unlikely to reach broader distribution in the coming weeks. Unless buzz begins to build -- something that's certainly possible if it smokes out some Oscar nominations tomorrow or if its decent Rotten Tomatoes score of 81% holds up -- it may be forgotten celluloid fodder until it makes the rounds in home retail distribution later this year.
The regrettable shake maker purchase
Kroc was selling five-spindle milkshake mixers to restaurants when he came across the thriving burger stand that the McDonald's brothers were running in San Bernardino. He was inspired by the innovative thinking of Dick and Mac McDonald who were reinventing the game in order to deliver quality burgers at blazing speed. From the assembly-line nature of the prep stations to wrapping burgers in paper and distributing them in bags to save on trays, plates, and cutlery, Kroc saw the potential in the operation. He also experienced the long lines once patrons warmed up to the learning curve.
Kroc convinced the brothers to allow him to franchise the concept in exchange for a piece of the royalty action. He was later advised to approach McDonald's as a real estate play, and disputes between Kroc and the McDonald brothers on the franchising direction culminated in Kroc buying out the brothers in a $2.7 million deal. There was also an alleged handshake deal that would give the founding brothers the same 0.5% royalty on gross sales in perpetuity that they were making before cashing out.
McDonald's investors may feel relieved at the outcome, since that 0.5% cut on systemwide sales to the McDonald's brothers' estate would be worth roughly $180 million a year. It's unlikely that the movie is going to spark much of an outrage beyond sullying Kroc's name, but since Mickey D's has long been a target for activists championing higher wages and benefits,The Founder should arm them with more ammo.
The movie's already coming out at an inopportune time. Shares of McDonald's closed lower on Monday after posting mixed quarterly results. Global comps rose 2.7%, but that was held back by a 1.3% slide in domestic comps.
Scathing portrayals of founding CEOs aren't fatal
McDonald's isn't the first company to have its "founder" CEO played up in Hollywood as a power-hungry monster. Jobs and The Social Network also cast Steve Jobs and Mark Zuckerberg, respectively, in negative lights.
Thankfully for investors in those companies, both of those stocks have gone on to post big gains in the months and years since those films came out. Folks may be more critical of Kroc's legacy at this point, but McDonald's stock will survive The Founder just fine.
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